Nordea Bank AB will need to cut more than the 2,500 jobs already axed to adjust to slow growth, as Scandinavia’s biggest bank focuses on increasing rewards to shareholders, Chief Executive Officer Christian Clausen said.
“Exactly how we’re going to do this thing is not that clear,” Clausen said today in an interview in Stockholm. “I cannot say a number, but the trend and the plan we have seen executed over recent years, and also going further back, will continue so we will be fewer people going forward, that’s for sure.”
Sweden has subjected its banks to some of the strictest capital rules in Europe and warned it may raise requirements further this year after property prices and household debt levels soared. Though Swedish banks -- the best capitalized in Europe -- already exceed the government’s 2015 requirements, the goals are proving tough to meet without cost cuts as interest rates stay low and demand for loans remains modest.
“Although activity has picked up somewhat during the autumn, growth is still subdued and we now foresee a prolonged period of low-growth environment with lower than normal interest rates,” Clausen said in a statement earlier today, after publishing fourth-quarter net income that missed analyst estimates.
Nordea now targets 900 million euros ($1.23 billion) in measures to make the bank leaner through 2015, compared with a previous cost-saving goal announced in 2012 of 450 million euros.
“We must expect to see the number of employees coming down,” Clausen said in the interview. “Customers want digital services more and more, and that is obviously with less people.”
Efforts to cut costs have helped the bank raise its capital buffers and boost dividends. Nordea plans to pay 0.43 euro a share for 2013, up from 0.34 euro for 2012, it said today. The core Tier 1 ratio, excluding transition rules, rose to 14.9 percent of risk-weighted assets at the end of last year, from 14.4 percent in September “due to modest loan demand, strong capital generation and continued efficiencies,” Nordea said.
Nordea said its net cost-base in 2015 will be 5 percent below last year’s level “by reducing activity related expenses, adjusting distribution to meet changed customer behavior” as well as other cost reductions.
The bank had cut 2,500 jobs as of the fourth quarter, compared with the end of the second quarter of 2011. While Nordea had a total of 34,008 employees at the end of 2008, 29,429 people worked there at the end of 2013. It trimmed costs by 210 million euros in 2013, including 70 million euros in the fourth quarter.
Costs last quarter fell 0.9 percent to 1.28 billion euros. Net income declined 8 percent to 773 million euros, missing the average estimate of 871 million euros in a Bloomberg survey of 11 analysts.
“The new cost plan is positive if you assume revenue estimates remain where they are today,” Ronny Rehn, an analyst with Keefe, Bruyette & Woods in London, said by phone today. “But it looks like a defensive move as the revenue environment is still tough.”
Nordea shares fell as much as 2.5 percent in Stockholm, after earlier gaining as much as 1 percent. The stock dropped 2.2 percent to 87.95 kronor as of 2:06 p.m. Swedish time, giving the bank a market value of 356 billion kronor.
The bank had been projected to pay shareholders 0.4 euro per share, according to Bloomberg dividend forecasts, which take into account variables including analysts’ estimates, company guidance and industry analysis.
Nordea said it plans to raise its dividend payout ratio in 2014 and 2015 and that it will announce its long-term target “once the regulatory regime is clarified.” While the current policy states that “the total dividend payment will exceed 40 percent of the net profit,” Clausen said today that any new dividend payout target will be above the 56 percent of net income the bank proposed as a dividend payment for 2013.